What is the actual return on R&D investment?

It is often common to look at the expenditure on R&D to compare how different countries are doing in terms of innovation. But, what about the outputs from this activity? Which countries are more efficient in terms of R&D investment? Which countries have better return of investment (ROI) in R&D?

To provide a comparative overview on the ROI, specific data on 3 key R&D outcomes has been gathered for the top-10 most innovative economies according to the Global Innovation Index or GII (Cornell University, INSEAD, & WIPO, 2017), and compared to Spain. In particular, the following outputs has been selected:

  • Number of scientific and technical journal articles published (NSF, 2013).
  • Number of patents measured as PCT applications filled by country of origin, considering de sum of resident and nonresident applications (WIPO, 2016).
  • Income received from use of intellectual property (IP), a new indicator which provides insights on the balance of payments according to the International Monetary Fund (IMF, 2015)

The data above has been related to the gross domestic expenditure in R&D for each country, which was reviewed on my previous post Research expenditure by top innovators. As a result (see the figure below), specific ROI measures have been calculated as: number of scientific and journal publications per 1000 USD invested, number of patent applications per 1000 USD invested, and income generated from IP exploitation per 1000 USD in invested.

Return on R&D investment in 2017 for the most innovative economies in the world in comparison to Spain. Prepared by Francisco Velasco (www.fvelasco.com). Source: Selected data from NSF (2013), WIPO (2015) and IFM (2015).

Besides any arguable lack of scientific groundings from this approach (as it relates indicators that are not directly correlated and uses data from different sources and years), the model provides a very useful comparative overview across countries ina visual and intuitive manner. As per the figure above, the return of R&D investment in terms of scientific production places USA (265 articles per $1000 invested) as the most efficient country, followed by UK (139 articles per $1000 invested) and Spain (125,6 articles per $1000 invested). However, the ROI in terms of patent production placed also USA in the first position (378,6 patents per $1000 invested), followed by Ireland (49,5 patents per $1000 invested) and UK (32,6 patents per $1000 invested). Finally, the outputs in terms of direct income from IP exploitation, which is a very interesting indicator being recently collected, highlighted again USA as the country with greatest ROI ($78,5 per $1000 invested), followed by UK ($23,3 per $1000 invested) and Netherlands ($41,2 per $1000 invested).

 

REFERENCES

Cornell University, INSEAD, & WIPO. (2017). The Global Innovation Index 2017. (S. Dutta, B. Lanvin, & S. Wunsch-Vincent, Eds.) (10th ed.). Retrieved from https://www.globalinnovationindex.org/gii-2017-report

IMF. (2015). International Monetary Fund. Retrieved from http://www.imf.org/external/datamapper/datasets/BOP

NSF. (2013). National Science Foundation. Retrieved from https://www.nsf.gov/statistics

WIPO. (2016). World Intellectual Property Organization. http://doi.org/10.1016/0172-2190(79)90016-4

 

Mediocre management kills productivity

Many countries, such as Spain, has long suffered from very low productivity in comparison with other states in leading positions; there are many factors affecting productivity, and besides macroeconomics causes, this post focuses on “management” as a critical one.

The management quality of many CEOs and senior executives in certain countries is still characterised by an old-fashion style, where personal issues play a more relevance role than professional criteria. Such “mediocre management” affects employee motivation, business performance and at last productivity in any corporation. This pattern can be easily recognised because usually builds on two categorically wrong premises:


Information is power. This concept (first used in 1597) lacks from any logic in modern organisations, yet many mediocre managers believe that control of information is something “good”. The underlying reason for this behaviour is normally related to strong fear and insecurity that makes mediocre managers retain knowledge to preserve their status; it is a way to justify their meaning in the organisation. We may all agree that not all the information needs to be available for everyone, however this should not be made with the purpose of gaining power, but making more efficient the whole ecosystem.

Basic information is required to ensure an engagement-led culture in any organisation, which will make the whole environment more productive (unless otherwise we want to run a company of idiots). Concisely, basic information consist of:

  • Big picture information: which relates to the purpose and goals of the organisation. For example: where are we heading? What is the long-term strategy and how can I deliver it?
  • Feedback information: which relates to how do you fit in the purpose of the organisation and haw can you continue doing so? For example: how am I doing? How can I improve? How can I better help meeting the organisational long-term objectives?
  • Operational information: which relates to the day-to-day organisation of the activity. For example: who reports to whom? Who is responsible for what? What is my level of responsibility and decision?

Management is a superior stage. Mediocre managers have an exaggerated feeling of self-importance that makes them believe they are superior to others. This results in behaviours such as: having difficulty to delegate on others (they only trust submissive people that will not threat their status or challenge their views), making themselves inaccessible (their hierarchical mind-set makes them available only to a very limited circle of people they trust), or never congratulating anyone for their success (they are unable to feel happy for the success of others). Beyond this superiority complex, there is an obvious inferiority complex that makes mediocre managers delusional and unable to bring out the best outcomes out of people.


These two principles reflect part of the poor qualities of mediocre management, and broadly speaking drives organisations into a culture where personal-based decisions are more frequent than professional-based decisions, resulting in less productive ecosystems. Besides the great business and social achievements made by Spaniards over the last decades, management quality is still a key issue that needs to be addressed if we want to achieve a better position in terms of social wellbeing and international leadership.